Does corporate governance matter for stock returns? Estimating a four-factor asset pricing model including a governance index

作者：Carvalhal Andre^*; Nobili Carolina

来源：Quantitative Finance, 2011, 11(2): 247-259.

DOI：10.1080/14697680903373676

• Applied finance
• Applied investment analysis
• Asset management
• Bond yields
• Corporate finance

This paper investigates whether including a corporate governance factor in the Fama and French three-factor model helps explain stock returns. By constructing a broad corporate governance index (CGI) for Brazilian public firms, this paper documents that governance does explain average returns on stocks. Most importantly, the governance factor seems to be more powerful than firm size and book-to-market ratio. We also provide evidence that expected stock returns are negatively related to firm-level corporate governance. An investment strategy that bought low-CGI firms and sold high-CGI firms would have earned abnormal returns of around 10% per year during the sample period.

• 出版日期2011